MIDF reaffirms ‘positive’ phone on automobile sector, BAuto and MBM best picks

a car parked in a parking lot

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KUALA LUMPUR (Jan 27): MIDF Investigation has reaffirmed its “good” connect with on automotive industry underpinned by a solid whole sector quantity (TIV) recovery pushed by the tax getaway extension, a low interest rate ecosystem, a change to private vehicle utilization from mass transportation on concerns about social distancing and an underlying macro restoration.

In a be aware now, the research house stated the automotive industry made a sturdy close to 2020 with a 26% yr-on-calendar year development and a 22% thirty day period-about-month improve to December’s TIV of 68,836 models, which nears a record month-to-month significant.

“The robust December TIV was driven by 12 months-conclusion profits campaigns and a lot more importantly, as consumers rushed to profit from the tax holiday break which was before scheduled to end on Dec 31, 2020,” said the investigate residence.

MIDF also pointed out that TIV for the calendar year 2020 came in at 529,434 models, a little forward of even MIDF’s aggressive FY20F of 523,000 models and the Malaysian Automotive Association’s (MAA) FY20F TIV of 470,000, driven mainly by extremely good buyer reaction toward tax holiday getaway incentive considering that June 2020.

In accordance to MIDF, irrespective of the demanding lockdowns in March to April 2020, FY20 TIV only fell by 12% 12 months-on-yr, considerably narrower compared to the 41% 12 months-on-calendar year contraction found for the duration of the very first 50 % of 2020 (1H20).

Furthermore, throughout the fourth quarter of 2020 (4Q20), non-countrywide cars manufactured a comeback following aggressive launches this kind of as the new Almera (released in November 2020), new City (introduced in October 2020) as very well as the all-new Hyundai Kona and Mitsubishi Xpander.

“While the nationwide cars drove most of the restoration all over June-November 2020, non-nationals staged a strong rebound in December, up by 22% yr-on-yr and increasing its share to 45% of TIV (relative to 2H20 regular non-national current market share of 37%),” mentioned MIDF.

MIDF pressured that it stored its conservative FY21F TIV of 550,000 (+4% 12 months-on-calendar year) unchanged with probable upside than downside at this stage, particularly contemplating that next movement control purchase (MCO 2.) is a lot more accommodative to the overall economy, making it possible for a huge pool of sectors to operate in contrast to the earlier just one, followed by a sustained very low fascination rate setting as properly as the visibility of a vaccine rollout this time close to.

“As a end result of the world chip shortage condition now, we see soaring problem on the potential affect on auto production. The latest newsflows counsel that selective players such as Proton might be hunting to scale down output, but we would bear in intellect that for Proton’s Geely-based mostly SUV types (X70 and X50), localization level is still small at all around 40%, suggesting it is however quite reliant on the Chinese automotive source chain which is strike difficult by the chip scarcity concern,” MIDF pointed out.  

“While the effects may perhaps not be uniform across the board, e.g. our channel checks with selective non-nationwide players recently counsel generation is still functioning as per normal without the need of any source constraint so far, we remain careful need to the effect of the chip scarcity catch up with generation in this article,” it additional. 

MIDF shared that its prime sector picks are Bermaz Auto Bhd (BAuto) and MBM Assets Bhd.

It has a “purchase” connect with and concentrate on price tag of RM1.70 for BAuto as MIDF thinks the car business is a play into a probable manufacturer enlargement foremost to structural industry share development. 

Owning not too long ago acquired franchise legal rights for the Peugeot model, MIDF reported BAuto is eyeing a further mass market place model in the in the vicinity of future, positioned mostly to plug gaps in the lower cost factors in its product blend.

MIDF also suggests a “buy” for MBM with a target value of RM3.90 as the neighborhood investigate home thinks the auto corporation is a “cheap proxy” to an envisioned potent recovery in Perodua earnings.